At least one ILS deal to be impacted by changes to AM Best default tables

The rating of at least one insurance-linked security (ILS) may be affected by changes to default tables included within a new methodology and central repository that rating agency AM Best has launched that relates to the ILS sector.

AM Best has released a publication that provides an outline and summarisation of the methodology the rating agency uses to rate insurance-linked securities and insurance-linked structures (ILS).

‘Best’s Insurance-Linked Securities & Structures Methodology’ (BILSM) provides readers with insight into the information requirements, key rating considerations, risk modelling and surveillance activities that AM Best use to rate ILS transactions, including the rating of ILS funds and their obligations.

The BILSM will also will be the ongoing central repository for “Best’s Idealized Issue Default Matrix” and “Best’s Idealized Issuer Default Matrix.”

The rating agency said that it expects that at least one rating may be impacted by the changes to default tables included within the BILSM.

At the same time as the release of BILSM, AM Best is retiring two criteria procedures, ‘Best’s Idealised Default Matrix’ and ‘Securitisation of Reinsurance Recoverables’.

However, the company does not currently have any outstanding ratings which utilise these.

According to AM Best, the default matrices found in BILSM will supersede all existing versions of default matrices in currently published criteria procedures, making the separate criteria procedure, “Best’s Idealized Default Matrix,” redundant.